Where are all the Wiis?

So why aren't there enough Nintendo's Wii consoles in the shops this Christmas?:

Nintendo will miss out on an estimated $1.3 billion (£639 million) in sales this Christmas by failing to meet soaring global demand for its Wii video games console.

James Lin, an analyst at MDB Capital, which monitors retail activity, said Nintendo could sell twice the 1.8 million Wii consoles that it is manufacturing each month.

Nintendo says its because of a lack of components, meanwhile all sorts of rumours circulate that a warehouse full of consoles exists. The conspiracy theorists believe the company is stoking up interest in the product by making it appear truly scarce.

And, while I doubt the warehouse rumour, I don't doubt that the company chose to err on the cautious side when deciding on production, calculating that scarcity would help them.

I should think that far from losing millions, the shortage will gain them millions in the long run. Scarcity is a powerful social influencer.

In his book Influence, Robert Cialdini gives another reason why manufacturers allow their products to be scarce at Christmas - the principle of commitment.

Parents promise their children a Wii console for Christmas. When they can't deliver in time, they choose other Nintendo products - games, mobile consoles and so on. Then later they come back and buy the console anyway. Why? Because they promised.

Consistency with commitments is an important principle, never abandoned lightly.

The shortage of Wii consoles may be an accident. But it's a pretty convenient one.

Comments

[Simon Says]

Robert Cialdini's point seems a bit far-fetched and wishing to credit poor supply-side management with some undeserved super-marketing kudos! My kids would be gutted if I bought them the games (software) but not the console (hardware). That's even worse on Christmas Day than a game without the batteries!
Anyway - if you are finding it hard to find a Wii why not try and win one via link provided where my name is! I just spotted this competition as I was searchiug the web for a Wii myself! Seems free to enter and good luck to you if you win it and not me! Happy Yule to y'all!

[Arvind]

Interesting Post, i figured we could look at it in another way....
When a parent goes out shopping with the child to get a wii, and they find out that the wii is not available, IN ALL LIKELIHOOD, the kid will end up satisficing with a PS3 or a XBox. Kids do not have patience nor do they have long term planning skills to get games initially or mobile products and later get the console. The wii's current shortage may have something to do with a marketting stunt or may even be a shortage of consoles. I however feel that Nintendo will not really loose out or gain from the excercise. The demand for Wii is not restricted to children. It is also rampant amongst adults. Who have disposable income throughout the year and as such can afford to buy a wii at any time of the year.
All i can say is yay for Nintendo, they have opened up a new avenue of gaming. Just hope that Sony and Microsoft catch on...

[Tom]

Estimating demand must be phenomenally difficult for consoles. If it is a hit it could be sales of 2-4m in one year. If not 500,000 maybe less. Given most people are going to buy them in the same three months, I would go with being cautious and getting the estimates wrong every time!

[bEXHILL]

It was the same with the Atari 2600 console and the 48k ZX Spectrum in the 80's. I hardly think they're clever enough - or brave eough - to risk keeping warehouses full of them when there is such huge demand.

Same problem here in Melbourne by the way. I've had to have one couried down from Shepparton - which is close to a 4 hour drive - as it was the only place in the whole of Victoria that had any.

[markmcfarland]

There is a solution - which makes shortages and conspiracy theories irrelevant. Buy things when you know they're good, rather than when everyone tells you they are. We bought ours in July and have had months of seriously good fun. Wii is the best interactive gameware out there by far.

[NeilD]

There were plenty in the Virgin store in Paris I visited at the weekend.

[Matt]

Even here in Japan, the Wii console is still sometimes hard to get your hands on. Most retailers have only a few consoles at a time which is rare. While you can get "used" games systems in many places the new X-box and Ps3 are widely available but finding a used Wii is near impossible. The idea that the company is holding back to increase hype is a bit far fetched...if they were doing it to raise prices that would make sense(though it would be illegal in many jurisdictions). I think the reality is more mundane...poor logistical planning.

[adam]

Nintendo might be able to sell 3.6 million Wiis in December, but for the rest of the year it'll be back to 1.8 million. So they've either got to double their capacity for a month, or increase capacity by a smaller amount and build stocks over the year. Both strategies tie up capital and expose Nintendo to some hefty risks.

Also, by keeping demand above supply Nintendo can delay the point where it has to discount the console.

I think the role of the retailers is crucial here. They're loving Nintendo's strategy because they can bundle lots of high margin games and accessories in with the console. And there's nothing like a bit of seasonal goodwill for the channel to help keep your sales up for the rest of the year.

Maybe the question we should be asking is not how much money Nintendo could be making but how much more money than Sony and Microsoft it *is* making.

[Minute]

I think that it would be very difficult to make a business case for deliberately forgoing sales of a leading product at the busiest time of the year, in the hope of putting some kind of scarcity premium on later products.

It seems to me more likely that the problems are that forecasting demand is difficult, that manufacturing problems do happen, that there is not much scope for substitution, and that storage is expensive.

You're looking for a complicated explanation for a simple phenomenon.

[steve]

Bought mine on Amazon.de

[anne wareham]

They simply, like everyone else in the digital world, forgot the potential for sales from the enormous market of the over 40s. And that's where it's taken off.
AW

[bkrebs]

I don't know if the "scarcity" is quite as bad as it's being made out to be in this article. It's dependant on the time of year you are looking. I have a Wii and when I bought mine (early fall) there were 15 in stock. No lines no crowds. I thought maybe I just got lucky but it wasn't just me either. I have several friends who bought them after I had gotten mine. One friend in particular bought one for as a gift and went back later in the week and bought another for himself. He had said there were over 20 in the store the first time and 5 left the second. Maybe it’s just the area I live in.
The reason they so scarce now are because everyone is trying to buy them for Christmas. They only make so many and when you have millions of people trying to buy, then yes, there will be a shortage. That’s just how supply and demand works. Hardly a conspiracy by Nintendo. I think if people are serious about getting one, you have a better chance in an off "gift giving" season.
Cialdini talks about parents promising their kids a Wii… Who does that?? It’s not a big mystery that these things are hot and hard to find, especially this time of year. I wouldn’t promise my kids a Wii unless I had it in hand. To me that just seems like being an irresponsible parent. I say to Cialdini, don’t blame Nintendo because irresponsible parents make promises to their kids they can’t fill out on.

[Ria]

I've found loads of wii consoles for sale. They have been on e-bay for ridiculous buy-it-now prices and some stupid people have been bidding silly money to these rip-off merchants because they have made promises to children in this world where yougsters aren't brought up to know the value of things. But how wicked are those sellers who blatantly advertised that they 'heard that wii consoles would sell out, so they rushed out and bought half a dozen' to sell on, at profit, whilst making it sound like they were doing parents a favour? Greed beyond belief!

[jonathan law]

they are all here in france....there's loads of em!!

[Nick]

I think the early Wii shortage was caused by a lot of people buying them in bulk and selling them on ebay for profit. After the initial media hype the prices on ebay have dropped to a point where it's not really worth buying them to sell on. Hence, this month the number of Wii's available in store or online has increased.

[James]

The truth here is that Nintendo don’t really care about the UK or European markets very much. Compared with the huge number of units they sell in the Far East and North America, we represent such a small slice of their pie that we always get left till last. That translates to release dates as well as stock quotas. We are the last to get the new consoles and games, and the last on the list for fresh stock from the factories.

[Kate]

You can get them but with the average normal price of between £170-80 for the actual Wii plus one game one shop I know will only sell them as part of a package which costs between £300-£350 with 3-5 games. Once again parents are being forced to fork out more money than necessary to keep their kids happy.

[Juan]

I believe NZ and Australia get worse gaming service than the EU/UK market, and in the "Far East" it is only really Japan that gets priority, which isn't surprising, since Nintendo (and Sony) are both Japanese companies. I understand East/SE Asia, India gets rather less attention than the EU/UK when it comes to consoles as well. Mainly because you guys are far richer. So maybe it isn't so bad eh?

[Mario]

Having used to work for Nintendo and in particularly logistics many years ago; retailers typically place their orders for consoles and games torwards the middle of October through to early November in order to take avantage of Christmas.

Retailers also provide feedback in the forecasting of consoles, games and the like, so that stock arrives in early October to Nintendo's distribution warehouses before fulfilling orders placed by retailers.

The issue you find is that a lot of retailers have problems holding too much stock (limitation in space) and therefore need to be particular in where they think will sell the most. When it was launched, the Wii was considered as a "lower-end" console compared to the XBox360 and PS3 and the popularity/hype was all taken up by the other two consoles - however, due to the fact that the market has opened up to the Wii's capabilities the surge in popularity has caught many retailers by surprise. Retailers are in a frenzy after they've sold all their allocation - and are desparately trying to order more stock. The stock that arrived in early October is usually 85-90% allocated, so the fact is you're not going to get anymore until more is shipped in - which typically takes 2-3 month from manufacturing to loading in on and off a boat and getting it to the stores.

No retailer is going to tell you they stuffed up their forecasting - 'cos you won't go back there again. Instead they may tell you the manufacturer stuffed up and then offer to sell you something else.

If there is money to be made immediately then why wait? And especially with technology no one can afford to not sell what you can while you can - 'cos in 6 months, who knows what will be the latest gadget?!

[Elle]

I don't know what all the fuss is about one of my sons brought a Wii ages ago and he has played on it less than five times, not everything is as good as it seems!

[joe]

James said "Once again parents are being forced to fork out more money than necessary to keep their kids happy".

By that reasoning, parents should do anything to give their children (aka spoilt brats) whatever they want.

It would do great good for the kids to learn that they can't have it all, that there are limits, and what the reason is in this case, eg ridiculously high prices that will be more reasonable in a few weeks.

His way teaches them to be whiny brats that blackmail their parents.

[Chrisy]

"In the long run"
That's pretty silly to suggest, as console lifecycles are only 3-4 years until they churn out the next generation of consoles, so its difficult to expect they will profit more than they are missing in profits now. They would do themselves and their customers a favour by making wiis more available.

[simon]

I think component shortage is probably the true answer. It's easy enough to bring new assembly plants on line but if you haven't got the graphics chips to put on the circuit boards, there's no point.
The graphics chips are generally patented parts made by a single firm -- nvidia and IBM, in this case I think.
A wafer fab can't change production on a sixpence and you can't build a new one overnight.

[Ruairi]

I tried to buy a wii in the Netherlands in April and they were sold out. I was told by one retailer that they were recieving 5 to 10 a week on their Thursday delivery but were sold out within 3 hours every week. It was not until one of the major retailers had a shipment from Spain in June that they had them in stock. The big problem now is trying to get hold of some of the games, Mario Galaxy etc.

[John]

I bought a Wii yesterday from Argos, £209 with 1 game, seems deliveries are arriving as 3 or 4 shops had stock yesterday in South Yorks.